posted 12-26- 12:06 PM            

ASIAN BUSINESS NEWS
Asia's Forests Head to China
Beijing's Logging Ban Sparks
Fears of Deforestation Abroad

By DAVID LAGUE
Staff Reporter of THE WALL STREET JOURNAL

HONG KONG -- A flood in China is endangering the forests of Southeast Asia and Russia.

In the summer of 1998, China imposed a sweeping ban on logging after the worst flooding in almost half a century. Experts agreed that excessive tree-felling in the upper reaches of the Yangtze and other river systems had contributed to floods that killed more than 4,000 people and forced more than 18 million from their homes. The ban slowed the destruction of China's forests. But it also forced Chinese industry to turn to imports to meet the burgeoning need for timber -- helping to accelerate the felling of some of the world's remaining major forests.

"You have a country that is growing at 8% to 9%, where its own domestic supply of forest products is decreasing, so it has created huge demand for forest products from the region," says David Kaimowitz, director-general of the Center for International Forestry Research, a research institution based in Bogor, Indonesia.

As Beijing's harvesting ban took hold in the late 1990s, China became the world's second-biggest timber importer behind the U.S. Figures compiled by Cifor, which is funded by 50 governments and agencies, and Forest Trends, a nongovernmental organization based in Washington, show that the value of China's total timber, pulp and paper imports soared 75% to $11.2 billion in 2002 from $6.4 billion in 1997.

International agencies and environmental groups say that much of this demand is being supplied by illegal logging. A United Nations analysis of timber statistics for 2002 shows that China's reported imports of logs from Indonesia were more than 200 times higher than the figures reported by Indonesian customs.

Meanwhile, Chinese imports of timber from Russia's huge coniferous forests, particularly in Siberia and Russia's Far East, reached 17 million cubic meters last year, up 70% from 2001, according to U.N. figures. Environmental groups estimate that almost 60% of logs imported into China come from Russia and at least 20% are illegally felled and smuggled across the long, poorly policed border.

Environmental activist Anatoly Lebedev, who is based in Vladivostok, Russia, believes the real volume of illegal logging could exceed 70% of the total, with corrupt officials and criminal gangs on both sides of the border playing a major role. Mr. Lebedev and fellow activists complain that efforts to combat illegal loggers are hampered by inadequate laws, poor monitoring and the widespread forgery of documents and permits.

Environmental groups are also monitoring the impact of demand from China on logging in Myanmar, Cambodia, Laos, Vietnam, Thailand and Papua New Guinea. In an Oct. 7 report, the London-based environmental watchdog Global Witness accused Yangon's cash-strapped regime of excessive logging in some of the world's largest remaining tracts of virgin tropical forest. The report said investigations along Myanmar's border with China showed that extensive swaths of pristine forest in Myanmar's Kachin state had been taken to supply the China trade.

The rise in demand from China is particularly hard on Asia's forests because of its timing. Forests were already depleted after decades of harvesting -- first for the U.S. and European markets and more recently because of Asian demand from countries such as Japan, Taiwan and South Korea -- before China kicked in as a major market. In addition, conservation policies were only just beginning to come into effect in many logging countries, and are unlikely to be strong enough to withstand the increase in demand.

Demand from China is set to increase as the country's timber-consuming industries continue to make inroads in foreign markets. U.S. furniture makers, for instance, say that U.S. imports of Chinese wooden bedroom furniture have tripled in value from about $400 million in 2000 to an estimated $1.2 billion this year. This month, the U.S. Commerce Department launched an investigation into complaints that Chinese-made bedroom furniture was being dumped in the U.S.

China also exports wood and wood products to countries much nearer to home. In Indonesia, timber companies complain that plywood from China is made from illegally exported Indonesian logs. The imported plywood ends up cheaper than local products because Indonesian taxes aren't paid on it.

And at home, furniture sales are jumping -- up more than 43% in November from a year earlier -- as increasingly affluent Chinese migrate to towns and cities and buy new homes. A recent study by the World Wildlife Fund forecasts that China's domestic supply of industrial wood will reach 114 million cubic meters by 2010, leaving a shortfall of 99 million cubic meters that will have to be met by imports.

There are efforts afoot to end trade in illegal logs. In December 2002, China signed a preliminary agreement with Indonesia aimed at halting the trade in illegal logs. However, many environmentalists are skeptical that this will have any impact until Jakarta tackles corruption in the logging and timber industries. According to organizers, China is also watching an experiment in bar-coding and tracking Indonesian logs from the forest, through the sawmill, to retail outlets. Nigel Sizer, who is spearheading the project for the Arlington, Virginia-based Nature Conservancy, says he has discussed the bar-code project with Chinese officials.

Beijing is also coming under pressure to relax its logging ban selectively so that designated forests can be harvested on a sustainable basis. At the same time, environmental groups including the World Wildlife Fund are encouraging China to improve and expand its commercial timber plantations, which could replace a big proportion of imports if managed efficiently.

Some foreign-owned timber-plantation companies now see China as a potentially lucrative market and are expanding their holdings. Toronto-listed Sino-Forest Corp., which operates plantations in southern China, plans to list a subsidiary, Sino-Wood, in Hong Kong early in 2004 with the proceeds to be used to fund expansion on the mainland. "China will be a suppliers' market for 20 years," predicts Sino-Forest Chairman Allen Chan.

Write to David Lague at david.lague@wsj.com

URL for this article: http://online.wsj.com/article/0,,SB107213677795871800,00.html

posted 12-27- 08:28 PM            

SINGAPORE — Every two years, Indonesia loses about 15,500 square miles of forest, an area roughly the size of Switzerland, to rapacious logging.

Skies in northern China glow orange in sandstorms that cross the Pacific and lay dust on the western United States. In Hong Kong, raw sewage bobs in its pearl-blue harbor.

From inner Mongolia to the Indian subcontinent and tropical Southeast Asia, says one senior United Nations environmental official, the region's ecology and environment is deteriorating as its factories and economies boom.

Although governments are rolling out unprecedented initiatives to tackle Asian pollution — underscored by a meeting of Southeast Asian environment ministers in mid-December in Myanmar — the policies are often badly enforced, the official adds.

"Things could get worse before they get better," Ravi Sawhney, director of the environment and sustainable development division of the United Nations Economic and Social Commission for the Asia-Pacific, or UNESCAP, said in an interview.

Sawhney is studying Asia's environment for the U.N. State of the Environment Report released every five years. Although the next report is not due until 2005, Sawhney said indications point to a broad-based worsening in environmental conditions.

"There are policy initiatives that have been taken and laws enacted and so on. But the problem is the actual implementation," he said.

As if to highlight what he says, landslides and mudslides as recently as November and mid-December in corners of Indonesia and the Philippines plagued by illegal logging swept away or buried alive whole families.

Winds of change

Six of the world's 15 most polluted cities are in Asia, and the region generates a third of the world's carbon dioxide emissions. In Asia's developing regions, around 785 million people lack regular access to safe water, UN statistics show.

But there are pockets of improvement.

The air quality in notoriously polluted Bangkok, Dhaka, New Delhi, and several Chinese cities is healthier sincemost of Asia, except for Indonesia, phased out lead from gasoline, said Cornie Huizenga of the Asian Development Bank's Clean Air Initiative.

Bangladesh, which is spending $30 million over two years to bring natural gas to 100 gas stations, is replacing high-polluting two-stroke engines in its rickshaw taxis in the capital Dhaka with cleaner-burning natural gas power.

"It's an unequal picture. There are cities where the situation is getting better," said Huizenga, adding that a growing number of cities have put up air monitoring systems.

Thailand's "tuk tuk" taxis now run on liquefied petroleum gas, while buses and taxis in New Delhi and Bombay are phasing out diesel and running instead on compressed natural gas. "This is very much the story of the future," he added.

Environmental investments

Huizenga and other environmental experts helped the Association of South East Asian Nations (ASEAN) draw up an anti-pollution plan as rising wealth brings demands for better urban conditions after decades of squalor in some countries.

Southeast Asian Environment Ministers meeting in Myanmar approved a non-binding "framework" which calls on ASEAN to develop stronger urban anti-polluting strategies beginning with a series of workshops next year.

"Due to rapid growth, you're getting overlapping problems — water, air, land — on top of each other, making a very complex situation," said Peter Marcotullio, a researcher in the Institute of Advanced Studies at the United Nations University in Tokyo.

"So part of what is being done here is to tease out some of these problems so that city managers can deal with them one at a time, as opposed to what seems to be happening is that they are all coming at them at the same time."

Fixing Asia's environmental mess — from stifling sandstorms and rapid soil erosion in China to treating sewage in Indian rivers and Southeast Asian air pollution — is turning into a billion-dollar business.

U.S. Department of Commerce is sending an environmental technologies trade mission to Malaysia, Thailand, and Vietnam in March to scout for opportunities for U.S. companies, citing "significant" potential for U.S. expansion.

It estimates that Malaysia's "environmental" market is worth around $800 million, mostly for safe water supply and sewage treatment, and says Thailand needs to spend around $1.2-$1.5 billion on clean water and sanitation by 2020.

In Vietnam, a pollution control equipment and services market was worth US$450 million in 2003 alone, it said.